Turkish inflation surges to highest in almost 14 years

Turkish inflation accelerated to the highest level since December 2003, pressuring the government and central bank to act to arrest price increases.

Consumer price inflation was 13 percent in November, led by an annual increase in transportation and food prices, the statistics office in Ankara said on Monday. It was 11.9 percent the previous month.

Turkish Deputy Prime Minister Mehmet Şimşek said inflation spiked due to the increase in food prices, which rose 15.8 percent compared with 12.7 percent in October.

“A persistent downward trend in inflation is likely from December onwards,” Şimşek said in comments on Twitter. “The Food Committee has been formulating structural remedies to reduce volatility in food prices.”

Food and beverages have the largest weight in the inflation index at 22 percent. Inflation in transportation, with the second-biggest weight of 16.3 percent, accelerated to 18.6 percent.

Economists are calling on the central bank to increase interest rates at a meeting on Dec. 14 to stem inflation and a slide in the lira’s value against the dollar, the most pronounced among major currencies this year. President Recep Tayyip Erdoğan, seeking re-election in 2019, has departed from conventional economic theory and criticised calls to increase interest rates, saying such a move would stoke inflation further.

Producer prices increased to 17.3 percent. Inflation for intermediate goods was 23.4 percent after a recent decline in the lira – Turkish manufacturers import many goods and then sell them as finished products in Turkey or re-export them.

Increases in producer price inflation were stemmed by a 0.1 percent annual rise in the price of electricity and gas. The government has exerted control over energy costs to help manufacturers and consumers.

Turkish inflation in November
Turkish annual inflation to November 2017 (Source: TUIK)